Bank Accounts

Why might it be of interest?

There’s no one size fits all solution to how we manage our young person’s income and outgoings – or help our young person manage it themselves.  There’s also no right or wrong solution.  There is a range of options and what will work for you and your young person will depend on how much help they need – and are willing to accept!

The following is intended to be an overview of all of the options and scenarios I can think of which I hope will, indeed, cover all of our potential situations.

Should they have a bank account in their own name?

This is really a preference – yours and theirs – taking into account the pros and cons of any banking solution.  Your young person’s ability to understand, or not, about money and its management will also determine whether they even can have a bank account in their own name.  And finally, whether you have their Power of Attorney or deputyship.

When can a young person have a bank account in their own name?

If your young person has the mental capacity to manage the process – with your help – to open a bank account then they can have accounts in their own name.

If your young person has the mental capacity to grant you their Power of Attorney (PoA) then you can open bank accounts on their behalf in their own name.

If your young person does not have the mental capacity to manage the process then they can’t open a bank account in their own name.

If you have a Court of Protection Deputyship then you can open bank accounts for your young person in their name.

When I say ‘manage the process’ what I mean is that they understand what it means to open a bank account and have some idea about money and the management of it.  This can be at a basic level but there needs to be some understanding around money.

A good guide to their level of understanding might be the Mencap easy read guide around granting Power of Attorney.  This isn’t about bank accounts but if you’re not sure what your young person’s level of understanding is around financial matters this guide might help you decide:  https://www.mencaptrust.org.uk/sites/default/files/2023-12/2%20Easy%20read%20guide%20and%20record%20to%20property%20and%20financial%20affairs%20LPA.pdf

I know you can do all this online but at some point you have to tick a consent box and you can’t do that for an account in the young person’s name if the young person does not understand what’s going on.

Separating their benefits from family money

There’s no hard and fast rule about when this should happen.  If you are a DWP Appointee for your young person their benefits are, at least initially, likely to be paid into a bank account in your name.  There’s no reason that this can’t continue if it is working for you and your young person.

While a young person is at school/college and living at home this account may well be a family account.  However, certainly when they leave home, if not before, you should have an account solely for their benefits and expenditure – even if it remains in your name.

You are not likely to be asked to account for the way you spend your young person’s money but Universal Credit can, and does from time to time, ask for bank statements.  If your young person’s UC is being paid into a family account you are going to have some work to do to demonstrate what is your money and expenditure and what is theirs.

If you are on benefits yourself you do not want their benefits to be seen as your income as it will affect how much you receive.

And from a purely practical point of view, especially when the young person no longer lives at home, they will need direct access to their money – even if it is still through you – for their living expenses and other expenditure.

Sole name or joint name bank accounts?

Sole:  If a young person has a bank account in their sole name, unless you have their PoA or a deputyship, you do not have any legal right to access the account.

Not to employ scare tactics as there is no reason why young people should not have bank accounts in their own name but if your young person decides they can manage on their own, changes all the passwords and refuses you access then legally that is their right.

I do not believe this is a big problem but you should know your limits!

Joint:  You can open a joint account with your young person if they have capacity or you have PoA or deputyship.

A joint bank account can be a good solution but it does link you financially and you are both responsible for any actions taken on the account.

There are probably steps you can take to limit any damage but if you have a young person who might run up an overdraft, who might take out loans connected to the account, who might spend impulsively then you should consider carefully if this is a good solution.

Their actions could affect your credit score.

Levels of oversight

These are some of the scenarios from your young person being very independent with their bank account to you maintaining management.

Your young person has a bank account in their own name which they manage.

If they are amenable they can let you see their transactions by showing them to you or they could let you have passwords so you can access their account directly.

An alternative is ‘read only’ access.  This is when they grant you access to see transactions but you can’t do anything on the account directly.  This can be helpful as you may spot trends, duplicate payments or expenditure that’s too costly for what it is, for example.  You can’t change anything but it gives you the opportunity to speak to your young person and perhaps sort any difficulties out before they become serious.

Hope Macy have a service called Family Connect that allows you to do this very thing:  https://www.hopemacy.com/family-connect/.  You might find that your young person’s bank has something similar.

The benefit of this sort of support is that the young person remains in charge and responsible for their income and spending but you have oversight that helps you offer support if needed.

Your young person has a bank account in their own name that you manage.

This might be because you have the banking app on your phone or you have logons and passwords.  In this scenario the bank account is simply in the young person’s name but you are in effect managing the account entirely.

This can work well as long as the young person is open to you having the banking app on your phone or sharing it with you when you ask or simply keeping you informed of their transactions.

Your young person’s bank account is in your name.

This is where the account is in your name and therefore you have full access to it to manage income and expenditure.  Ideally, this account is quite separate from your own.

You may want to consider having this account joint with another person other than your young person – perhaps a sibling.  The reason for this is that any accounts in your sole name will be frozen on your death – no money can be paid in and no money can be withdrawn.  If the account has another name on it then it does not get frozen and management of it passes to the other person named on the account.

Again you have to be cognisant of the implications of a joint account.

Joint bank account with your young person.

In this scenario you both have your own card and both have access to the bank account – income, expenditure, all the transactions.  In practice, this account should only be for your young person’s income and expenditure – your own money should be kept separate.

This can be a good solution to give you as much control as you need or want while giving your young person some independence.  But do keep in mind my further comments about responsibility for the account and that you are financially linked.

More than one account?

There can be benefits to having more than one bank account for your young person around managing their money.  This is something I do personally to manage my daughter’s money but I have read it as a recommendation on banking websites.

The set up here is that one account has all her benefits paid into it and I pay out any regular payments.  She doesn’t work so there’s no earned income going into this account but that’s where it would go if she did.  Regular outgoings could include the contribution to the social care package; contribution to housing costs not covered by housing benefit; utilities bills; mobile phone; subscriptions; etc.  The only person who has access to this account is me (in this case because it is in my name).

We have a separate account for her daily spending money.  In our case this is also in my name.  This account doesn’t have an overdraft and I load it up with money from the main account as needed.  She uses this account for all her daily spending – on food, travel, entertainment, taking cash out.  I have the app on my phone and when the balance drops below a certain amount I add more money from the main account.

As my daughter only goes out with carers it means that her carers can pay for things as they go – with the card or taking out cash – but they and we have the comfort of knowing that they have no direct access to her main income.  Carers are reluctant to have a bank card with access to the whole of a person’s income – you can understand why!  And you are not likely to want a carer to have access to their whole income.  Even if your young person doesn’t need a carer this is a simple way to help them manage their spending and keep within a budget.  And if they are in a situation where someone is trying to take advantage that they have limited funds to hand over.

You may even consider having a 3^rd account for savings.

Benefits

Your young person’s benefits are paid into an account that they or you have nominated.  If you are their DWP Appointee letters will be sent to you with annual updates for PIP.  If they are receiving Universal Credit the amounts, dates, etc are all held in their online account.  Again, if you are their DWP Appointee you may have set the account up but if not – it would be a good idea for you to know the username and password so you can help if there are any difficulties with the UC payme